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I lease a car and pay a monthly payment that covers the cost

Resolved Question:

I lease a car and pay a monthly payment that covers the cost of lease and all repairs, servicing and insurance.
The leasing company has negotiated deals that they offer to my employer. They are an unlinked/unrelated company.
The leasing fee is deducted from my gross salary and I therefore incur a company car benefit through my P11D so that tax is paid.
Inland REvenue are giving conflicting advice as to whether I can claim the diffference in mileage received and the mileage allowance. A number of my colleagues claim this and have done for a number of years, yet some of my colleagues have been refused.
I cant see how this lease agreement is any different to a lease I could arrange with any of the major car manufacturers. Your advice would be most welcome
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question
When you advise that the you lease a car and pay a monthly payment - do you mean that you pay the lease company directly, and that this is a private arrangement between you and them.
I ask this, as you seem to suggest this is the case, but then go on an say
"The leasing company has negotiated deals that they offer to your employer, and furthermore than the lease fee is deducted from your gross salary.
So are you in fact saying that the lease company has the contract with your employer, and you are charged the fee - and then as the employer advises HMRC of the benefit provided on form P11d , that this is deducted from your personal allowances (via your tax code)
Or are you saying its declared on the P11d, and the employer also deducts this charge for the lease from your salary
Tell me step by step how this lease came about, who pays for it and whether the employer deducts anything from your salary to cover this charge, or whether what is deducted from your salary is due to the tax code being reduced (so you pay extra tax)
Thanks
Sam
Customer: replied 2 years ago.

Sam

We used to be on a standard company car scheme and a car was provided and P11d benefit taken. The car provider was an associated company.

However now the cost of the lease is deducted from my gross salary by my employer. As no tax has been paid on this monthly amount then a P11d benefit is applied to compensate for this.

The cost of the car is directly linked to the deal I have negotiated through the preferred supplier.

I dont have to take the car I can have the cash instead.

As stated the revenue are giving conflicting advice to me and my colleagues as some are receiving the mileage allowance and others are not.

When I first rang the revenue I was told I qualified. I submitted form P87 for the past five years. The compliance department have stated I dont qualify and I should complete self assessment.

Expert:  Sam replied 2 years ago.
Hi Kevin
Then as the lease arrangement is clearly between the employer and the lease company - then this arrangement (from your tax position) is no different than the company car arrangement so its right that you are charged tax via the P11d being completed and this then deducted from your personal allowances (tax code)
As for the fuel position, this means you can only have the company car rates IF you pay for all the fuel yourself - which are
Company cars - advisory fuel rates from 1 June 2014
These rates apply to all journeys on or after 1 June 2014 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.
Engine size
Petrol LPG
1400cc or less 14p 9p
1401cc to 2000cc 16p 11p
Over 2000cc 24p 16p
Engine size
Diesel
1600cc or less 12p
1601cc to 2000cc 14p
Over 2000cc 17p
If this was treated as your own car (which would apply if you owned the vehicle or your lease arrangement was solely between you and the lease company) then you would qualify for
Tax - Rates per business mile
Type of vehicle
First 10,000 miles Above 10,000
Cars and vans 45p 25p
Motorcycles 24p 24p
Cycles 20p 20p
Either way a claim would only ever arise if the employer made good an amount per mile, less than the rates shown, and in your case the company car rates.
Is that the case?
Thanks
Sam
Customer: replied 2 years ago.

Sam

The revenue are taking a different view on a number of my colleagues as they are aware of the scheme. How do I stand if I challenge their decision? Is there an independent appeals process.

The cost of the lease is not even competitive in the market place.

I am contracted to keep the car for the designated period. I am paying the full cost of the car.

On a letter I had the revenue stated I must meet three criteria:

1. it must be necessary to incur the expense

2. it must be both incurred and paid

3. it must be incurred wholly and exclusively as part of the duties of employment.

I meet all three of those critieria.

Expert:  Sam replied 2 years ago.
Hi
All you can do is have the arrangement with the lease company itself and make good the payment of the lease from your bank, from your after tax salary. (like your phone bill, mortgage etc which are sometimes used for work purposes and a claim is due against your tax suffered)
If you had the arrangement direct with the lease company then you can claim the 45p a mile (but then have the lease costs to cover yourself)
HMRC would have advised that criteria on the understanding that you had the arrangement direct with the lease company - when you do not, your employer does. So the advise they give you is correct - based on what you seem to have advised them.
I cannot (as nor can HMRC) comment on the allowed claims by your colleagues, but if their arrangement is the same as yours, then they will in due course have to pay back what has been refunded to them in error, and they will be charged interest.
You cannot appeal as you do not incur this expense directly yourself, your employer does - and you should not be paying for it fully yourself but just be charged the tax due on the total cost -
You have no grounds to appeal
If you are in fact suffering both the lease costs - which merely pass from your pre tax salary to the employer, who passes this to the lease company AND are suffering additional tax on the benefit as shown on the P11d, then this is NOT correct, as you are being considered twice for this benefit.
IT should either be
1) The employer pays for the lease costs - at no cost to you at all - then he reports it on a P11d to HMRC who deduct this value from your tax code, reducing your personal allowances, which subsequently increases the tax you pay
OR
2) You pay for this out of your salary - after it has been taxed - and there is no benefit
Then fuel has to be looked at
All the time the employer has the arrangement direct with the lease company - then you are due only the company car fuel rates. if and when you have the arrangement directly with the lease company yourself, then you can have the normal "using own car" rates
But unless you are paid less than the rates that apply to this arrangement (so company car as employer has the arrangement with the lease company) for business mileage - then there is no mileage claim.
I am sorry, but the legislation is very clear on this matter. I wish I could find scope for argument for you -
Thanks
Sam
Customer: replied 2 years ago.

Sam

I do incur the cost myself as it is deducted from my salary. Currently this is £331pm and I suffer £5201 on P11d. I am incurring the cost as it is deducted from my salary and I am being charged P11d cost.

Is my argument therefore with the revenue or my employer?

Expert:  Sam replied 2 years ago.
Hi
If you only pay £331 a month - which equates to £3972 a year - then what is the £5201 incurred a year as shown on the P11d ?
Are you sure its meant to represent the lease costs ?????
This is most definitely an issue you need to take up with your employer - they seem to having their cake and eating it and you suffer the cost (possibly twice - although the figures do not tally, which makes me think the P11d charges are nothing to do with the lease costs??)
But back to the main point
You do NOT have the arrangement direct with the lease company - as your employer deducts the leases costs (as things stand) from your salary and pays that over to the lease company FOR you.
If you had the arrangement directly yourself with the lease company then the employer would have NO involvement at all - the payment would come out of your bank directly.
I am afraid HMRCs legislation on costs such as this, looks at who is paying whom - and you are out of the loop as being the legal leasee - its the employer
its all about who has the contract with whom - and the employer clearly has the contract with the lease company and is seen to make good the payment to the lease company (even though its been collected from you and you do indirectly pay for it - you do not pay the lease company directly )
Does this make sense ??
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13714
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 2 years ago.

Sam

thanks for this, albeit not necessarily the answer I wanted.

I have asked for a copy of the lease agreement but nobody can provide this.

The P11d is the car benefit using list price and CO2 emissions.

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